evangel crisis is this stuff is all eagle assuming it is all legal which by the way is a huge assumption what is the best way then to the terror bad behavior starting with the latest questionable example more than two thousand companies didn't tell investors they were preparing to file for bankruptcy turns out the letter of the law is murky in this area and it's on their side so earlier i spoke to dan ariely professor of behavioral economics at duke university and author of the book the honest truth about dishonesty i asked if we're to assume companies will opt not to do the right thing as long as they can get away with it legally. it's kind of the mixture of good news and bad news so i've been tempting people to cheat and steal money from you know companies but individuals and what we find is that we in a certain range of people can actually be this all of this and still think of themselves as all these people and i think the same thing goes for companies so what companies do see may be officially still murky but completely outright lying

with this deal called earnings calls and so you know what we are those even thinking about bankruptcy wouldn't cross our mind when they're actually preparing for it i don't think they would go that far but will they be able to rationalize what they're doing and basically enjoy least that well you know we're preparing for it but we know so sure only going to do it if there is still open let's go confuse people. in one of the things we find in these next floor we need to think about this all this do you need three elements you need the motivation you need a desire to see reality different way you need flexible rules that could be interpreted in many ways and you need the ability to rationalize your actions if you're actually good for the people that you do with and i think you can imagine how with this particular case all of those three things will happen i want to bring up in what you say are a kind of is the common view of why people cheat and just so people can see that

and then we can talk about how it's messed guided people that think that there's a cost benefit the it what do we stand to gain probability of being caught size of punishment you're saying this is not exactly right but i just want to make sure i connect it is this what typically informs policymakers when they're when they're making a financial regulations and laws to deter this kind of wrongdoing exactly ok so if the extreme case think about the death penalty right you say as long as there's something bigger than death penalty nobody would commit a crime but guess what when we look at states have the death penalty and they look at thirty eight dollars to go i don't think we can see any difference in crime or right bribery that justifies that so it basically tells us that even when the punishment is incredibly severe and it's very hard to think about the worst punishment in a death penalty people just don't think about it so our policy is aimed at the cost benefit analysis local saying just create the high cost and everybody will behave well this is not the reason nobody else properly noticed that criminals are stopped

who ever thought about what they're doing instead it's usually a slippery slope. people take the first step they rationalize it and was the first step to become slightly different people and then they did the next step and the next step and the next step and then it gets worse and worse from their perspective and they see other people around them and it's easy to rationalize and also silence the pressure of the market and it's the right thing to do and multiple steps removed from money and also. so it's easier to rationalize and the behavior gets worse and worse and i think the role of relations is not so much to punish people but to make it clear what's appropriate and you know i don't know they still seem to find player ways around it more on that in a minute there because you mentioned distance from money guest and being removed from it and you actually did an experiment where you put cokes in a dorm fred and you put dollars in a dorm fridge and after seventy two hours or some all of the cokes for god instead

and said nav any problem taking the cokes but they didn't take the money so why are people ok taken a thing but not. so so what happened is that the moment you think that what you're doing has direct negative consequences it's really hard for you to act this honestly and think good about yourself i'll give you an example from growth we did a study with twelve thousand block clothes and we said imagine your ball fell on the russe and you really wished it was four inches to the left would you pick it up and move it by four inches and people said heaven forbid i can't imagine doing to nobody i've ever played with it just illegal immoral would do it and then we said by our kicking it with you sure a little bit oh yes no problem there are good clubs that's even easier now the outcome is the same but then what would you do something directly you think very differently about it or think about another example how would you feel if you took fifty cents for the cash box compeer taking a pencil from work home if you took

a pencil for work you would probably not feel like a crook if you took fifty cents you would feel like a crook even if you took it and went straight ahead to buy a pencil so there is something about the immediacy of a consequence. and this is everywhere it's about relationship to money cash credit cards electronic wallets financial markets cash stock stock options the river tubes and also good. direction we have with other people we see somebody in the our own multiple steps removed in a different country is it kind of something diffuse and you know we usually have a tendency to say all these are just bad people but this is what happens if you put to good people in situation of conflicts of interest and multiple steps for money also in lots and lots of people can misbehave ok so then we are in a situation where that's the case financial instruments have become more and more

and more detached from what they really represent and even central bankers they can type zeros into a computer and increase the money supply and this is citing that we live in is becoming more and more cashless so there are just so many pet falls here and that it doesn't seem like there's any way around it. so you know i don't like this negative approach to life in general i think it's true that we can't reverse the wheel completely and we always have to deal with this complexity but they get that we can't do anything is also not correct so i think that we need to recognize the complexity and then we need to do something about it so you know if you have multiple steps removed from money and it's easy to misbehave maybe you should worry more about called. maybe you should worry more about regulation you know i'm actually kind of optimistic because recently i was met with lots of companies who are worrying about your code of conduct internally if it's doing is

they're saying that it used to be that the cause of call that was very general and fuzzy and ill defined and now they're starting to specify it much more precisely and i think that as we move to declare more specifically what the bank wants for its employees it will actually be very very helpful if we keep it fuzzy. and we can basically help people behave badly with no problem ok and what about the enforcers what about the people policing that you told a very interesting story that you kick. your book with were sent down to someone who was a consultant to enron and he was just in retrospect i can't believe i didn't feel all of these signs to what extent is that wishful thinking because you're talking to these people you're drinking the kool aid their buddies they're compelling they're convincing and to what extent does that impact regulators and auditors i think i think it's incredibly well it's incredibly tough to be objective as in all these. you know one of the best investments in the u.s.

is lobbying and the reason that global you such a good investment is that people are really cheap i mean you can buy somebody which in office and they start seeing life from your perspective and by the way this is not just bad it's also wonderful right it means it's easy to start a friendship which is you can get people to like you to care about you it's a part of a wonderful part of human human nature is world but once you have this relationship all of a sudden it's very hard that people would syria latina correct way and you know this is something that these sports friend knows any sports friend knows if they care about team a and they're playing against their biggest rival and they refer recalls a quality team they can't help but think of. evil blind stupid something you can't see reality in objective way lots of things change your ability to see reality liking a team is one of their money is more than their liking people here's another one and i'll tell you i talked to one of the guys who was in which it was part of the

m.c.i. carlton for many years ago. and he told me that when he started a counting fraud. his part of it wasn't the whole thing but his part of it it had nothing to do with his personal benefit for the company now the company is a big entity but he felt that this was he was out of the tremendous pressure to improve benefits accounting software was very fuzzy he didn't really realize what the rules are and what the regulation where something can stop and when can you just walk some income for the future and nobel and say you don't go to get it and so on and all of a sudden he basically used is flexible to hide lots and lots of money with out any personal benefit because he was part of the company he was working for the company so our ability for wishful thinking wishful blindness being part of the team is incredibly strong and because of their dictating the rules externally it's very important we can't expect. people who are inside the system all that goes to be

able to overcome all their biases. so you can expect auditors to overcome their biases what about regulators that one of a what their excuse we'll hear more about it from dan ariely author and professor at duke in just a moment also still ahead we talk to capital account guest steve cave about his latest project you won't want to miss it in a special live exchange but first your closing market number is.

i'm tsunami and i'm going to see you know that after you can see you know i'm going student bar. i did in our two exclusive marjorie's through sunday on r t r t dot com. it's. the. wealthy british soil. that's not on to the times we don't. like the.

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see it's so true. clinton. the two.

welcome back so as our guest told us auditors can't be objective they are just too subject to bias so let's take them another step out how to explain regulators and policymakers that seem to have so much bias too here's one example. alan greenspan it's been talked about so much how he was this free market guy in terms of his views and he was advocating for deregulation of wall street he back when derivatives after he had kind of advocated for their deregulation he said derivatives market participants seemed cammy aware of the counterparty credit risks associated with derivatives and take various measures to mitigate those for a specialist one example of course later famously he went on to say the following let's play a clip. i made a mistake in presuming that the sofa interests of organizations specifically banks from others or such is that they were best capable of protecting their own

holdings. so corsi was former federal reserve chairman the fed is a major regulator of banks of the industry so what do you do about you know the wishful thinking or the conflicts of interest or the ideological biases of someone like a regular. joe you know i think in the greenspan quote i think what's really important there is to think about the long term incentives so i think people in really good and caring about that short of uncertainty it's really hard to think about being so again we're just not good and think about the long term and the stock market is in principle supposed to be about the long term it's not about the short of it. so look i don't think this is an easy system to fix but i think that we have got to a situation where we have. to call blocks for us to right now on this.

you know in the same way that i think about medicine so the f.d.a. regulates medication and every time we want to introduce a new medication we have to spend i mean not me but medical companies have to spend a tremendous amount of money is showing that people are better off with this medication when we got this with the cage and i think we need to set. because of burden of proof for financial instruments it was before high frequency trading in the river to get all kinds of credit default swaps of being introduced to the market i want actual proof it gives those actually helping your financial market. though it's not easy to do but i think in medicine we have lots of ideas about things that will be helpful for people in there but by theory by biological theory they seem to be making sense but that if you try to help you discover they actually create more damage than benefit and we know much more about biology you know about the governments so not all of these financial people but they're like medications

we think by for lunch and theory that they're going to be beneficial but there's no evidence for that so you know in biology we kill people not we but you know bad medications emerge mccue people yeah so don't kill people just make lots of people poor and take money away from the economy but i think we need a much stronger burden of proof. instruments and make them commonplace i hear you want that i advocate that i totally hear you're saying one thing i want to i want to follow through one that we haven't touched on yet is this kind of social norms and i'm going to give an example that maybe ties into conflict of interest too so everyone now is talking about who president obama is going to appoint to the treasury timothy geitner won't want to stay as treasury secretary and one name that's been thrown out is erskine bowles and he is a former wall street guy he was a board member of morgan stanley his wife is on the board at j.p. morgan i'm obviously not any assuming that he will be treasury secretary or or how

these relationships will impact him if he is but just hypothetically what is the set up in terms of not just conflicts of interest but what you think is is ok and appropriate given the people that you're surrounded by your wall street friends your wife who works on the board it the big bank. so. so the example you gave for my history with enron with my friend it was very interesting because this was john kerry barlow who used to you know manage and write lyrics for the grateful dead and then at some point he started working with enron and what he told me was that not only that he didn't get cooling but he created the laid it all g. for himself that protected him from seeing anything it was going wrong and i think from my experience people in the financial industry are basically doing the creating of the near of of theory around it presents them to them so they're close friends as the hero of the call in the call of rights and their perspective

everything that they're doing is in this service of the world the world would not have been such a good wonderful place without we would have been in the dark ages we should be thankful for wall street derivative trading high frequency trading without death there more than society would just not exist in its current form and people need to ride they need this just if it carries in to justify the salary of their position especially in the last few years with all these attacks. so i think that they king somebody from the in-group somebody who basically for years have trained them so to believe in the know your logical way that we've got is going to be devastating dan ariely we hear you on that thought there a professor at duke university. all

right let's wrap up with loose change of areas bestial loose change do you notice something different here oh boy someone else is in that you are going a popular economist steve keen you know well he's a guest of the show author of debunking economics at he's wrapping up a campaign to continue debunking economics neoclassical economists with his minsky model and program and he's going to be on our show in a few weeks november nineteenth in the flash in the studio but for a little teaser we wanted to talk to him about it a little now just so we can be a little ahead of the current with the other media we've heard is in the pipeline so the doctor can thank you so much for being on the show and it's nice to see you tell it tell us what's new with minsky what you're working on now you know well the program is something i just thought of developing with a grant from on it with just about. about six hundred hours of programming has gone

into wood and it's now i think of working prototype to show people what we can do to model the economy as a monetary unstable system which would save obviously as your last days with grilling on on those issues and. most of all really usable by using change while the economy is fundamentally soft mccoll to build bank models and about five minutes it's running but we actually want. to try to get some serious funding but oddly enough to really reduce but probably not shocked by the program it will finally stop falling economy as it banks money and then just steve why is that important why is it important a factor in banks to factoring in money credit and debt into models and how is that different than the kind of new classical models that. students use today in university. all of the crushable models think that if you live in a bottle system you can actually leave money out of it thanks by now a central role and again i thank you my deah my full program for my comment and he's blasted five million he's bought

a few months ago i'm all for him facing criticism over including banks for that matter but why that is so important a story about debt and leverage i mean give me a break you look at the real thought that anybody does not follow by big nomics their principal economics the great can still run the financial problems caused by the banks creating too much data and creating too much money that generated speculative bubbles so you have to be able to model and have a model capitalism if you like banks money and that our modeling capitalism and that's unfortunately what students are learning and possibly commons at universities today minsky is a very lot of it easy strikes more try to show them a positive alternative problem just to take and as far as the models that students are using across the world in their neo classical classical training classes vs g.e. models can you just quickly tell us what they are for anybody that's not an economist or an armchair economist. this is i'll have to say there are some people who do good work with those models because you have

a brilliant mind people like michael kumar from the i.m.f. and i've got to admit for christmas brilliance there you can produce almost any answer you want out of them so they can be used to make you know sometimes interesting arguments but fundamentally that is to continue ocean of the old comparative statics approach the new must include an homage to sniff around run with and i want to make a couple of changes is it a different equilibrium and here that show they call it dynamics and it because they have one time period and the next time you're it written and really it's only comparative statics before and after some change in ramadan values sidewalks bandstand i bet it makes all sorts of of a science about believing that you can trade on a me as a single life actually and in very best evident number of different arguments none of them actually any amount of any out or so i did they don't look sophisticated because they're very difficult to deal but fundamentally then i'm all the same all of them are to static. not in century to good economy or to be in stock in progress

while the real world has moved off of the wrong see if you think the because i've noticed that you are you specifically have gotten a lot more attention obviously on this show on another shows you've been on the b.b.c. and other programs. and other economic modes of thinking besides a kind of traditional no classical thought that's dominated the spectrum has been coming out of the woodwork since who has made you the biggest driving force has been the financial crisis to awaken people or people. yeah absolutely mike i mean you would never have got the attention of the people who got size are listed in an enormous economic process which you can probably attribute to people believing this conventional if possible collide like alan alan greenspan we just had a lot of money to go because they believe that bailout is as your psychologist interviewer said a while ago they allowed all these social client is that it could have a vote themselves into believing the beneficial and actually get into the biggest economic process since the great depression so without that i wouldn't be getting

any apply at all. and we are hearing you're getting really notable attention by some maybe publications that wouldn't typically very into the alternative space and economics as i write can you say anything about that when you might not be able to go i've heard a rumor that is one of the one of the biggest magazines in the world maybe in the near future coming out and saying washington troll banks are using these models not looking at other ones and i've been inside central banks and had three that have been invited to speak so far and one of them i had to senior officials really wanting to develop my methods and model their economy that wire and blogs by the junior possible stop the couldn't imagine any other why the think about the global bodily the media langbehn the want to move all the state is getting exasperated with the government saying listen guys think outside this new york possible box so i was going along why when you can expect major journals of major public media outlets that are normally quite conservative in the economic space about to say

we're exasperated you've got to change or will change here and i think it's really because the you can actually use these these models remotely to now with the network and everything else people can actually play around with these models students anyone else that's interested not just central bankers so i think that's a really cool part of it too and they can check on your project get started on your website yes they're mocker ties ing modeling for all so steve king thanks for giving us the update can't wait to get you in person in a couple of weeks we can put some information on the kickstarter campaign on our facebook because. that's all we have time for that's our show today thank you for watching be sure to come back tomorrow and in the meantime you know you can follow me on twitter you can like us that our facebook page and dad catch any show you may have to leave us a comment on you two or in h.d. on hulu and from everyone here thanks so much for watching come back tomorrow and have a great night. you

know sometimes you see a story and it seems so you think you understand it and then you glimpse something else and you hear or see some other part of it and realize everything you thought you knew you don't know i'm tom harpur welcome to the big picture. do we speak your language i mean some of the will inevitably end. with news programs and documentaries and spanish more matters to you. a little tonnage of angola's kidneys stories. for you here. in troy spanish find out more visit.

this was the plant that was responsible for causing the world's worst industrial disaster and now it had been abandoned in a condition where it had become a source of pollution or the most recent study that was done shows that this water pollution and spreading. and the need to be more than hundred thousand be both been chronically ill. welcome the fact that children see their children to be ten times more likely to be born with birth defects and children in the rest of the country. people who see as little as five hundred dollars for lifelong into these. unpunished.

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